Thursday, 13 August 2015

Landlord subsidies

The welfare weenies are slowly realising that the rent subsidy they pay to beneficiaries does little more than, guess what, go to subsidise higher rents – leaving landlords better off and beneficiaries as far behind the 8 ball as before.

The euphemistically titled Ministry for Social Development has just released a report about this little-studied area. Based on the limited evidence available however, it concludes (their words):

  • The literature review found evidence to support the contention that a proportion of demand-side housing subsidies is capitalised [sic] into higher rents in the private rental market.
  • Estimates of the magnitude of landlord capture vary from 30 per cent to 78 per cent of the increase in subsidy.

So in large part the so-called Accommodation Supplement is more accurately a Landlord Income Supplement – which when added to the middle-class rent/mortgage subsidy represented by the Welfare for Working Families scheme makes a sizeable supplementary hurdle to first-home buyers, in that when all those landlord/mortgage subsidies are capitalised they tend to further raise house prices.

You’d call it another example of the Law of Unintended Consequences, except that only a moron (or a welfare weeny) would think the consequence was unexpected.

There is no part of the economy more stuffed up and regulated by government than housing. So this is just one more distortion in what is already one of the most stuffed-up-by-government parts of the local economic system.

No wonder the housing market is broken.


[Hat tip Lindsay Mitchell]

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